akuntansi biaya manajemen biaya analisa ka
1. What are problems that Xu Ji encountered by its former traditional costing
system?
The traditional method of cost accounting refers to the allocation of manufacturing overhead
costs to the products manufactured. This force products to absorb all manufacturing overhead
costs regardless of whether they actually consumed the costs that were allocated to them.
And, traditional cost systems rely exclusively on allocation bases that are driven by the
volume of production. The traditional method assigns or allocates the factory's indirect
costs to the items manufactured on the basis of volume such as the number of units produced,
the direct labor hours, or the production machine hours but selling and administrative costs
are not assigned to products.
Pros and Cons of Traditional
Advantage of using traditional-based costing is that it aligns with Generally Accepted
Accounting Principles, or GAAP.
Easy implementation for companies that provide one product also is a plus.
Traditional costing is an outdated costing system in many companies because those
manufacturing companies now use machines and computers for much of their
production.
Computers and machines make the system outdated because it often uses direct labor
hours to calculate cost. Cost is not appropriately assigned because direct labor hours is
not the best cost driver to use.
Traditional costing negates other cost drivers that may contribute to the cost of an
item.
Another disadvantage of solely using the traditional costing system is that it can lead
to bad management decisions because it excludes certain nonmanufacturing costs.
So if Xu Ji encountered by the former traditional costing system it will conduct innacuracy of
product costs because accounting was predominantly driven by external financing report
purposes. Because of this innacuracy of product cost, Xu Ji’s ability to compete in pricing
with its competitor to facing Chinas free market competition was become lower.
As we can see in picture, the direct labour cost instead of being charged directly to products,
was allocated first to production departments then to finished products. ABC costing is
needed to fix this problem so that the direct labour cost can be charged directly to product
cost.
system?
The traditional method of cost accounting refers to the allocation of manufacturing overhead
costs to the products manufactured. This force products to absorb all manufacturing overhead
costs regardless of whether they actually consumed the costs that were allocated to them.
And, traditional cost systems rely exclusively on allocation bases that are driven by the
volume of production. The traditional method assigns or allocates the factory's indirect
costs to the items manufactured on the basis of volume such as the number of units produced,
the direct labor hours, or the production machine hours but selling and administrative costs
are not assigned to products.
Pros and Cons of Traditional
Advantage of using traditional-based costing is that it aligns with Generally Accepted
Accounting Principles, or GAAP.
Easy implementation for companies that provide one product also is a plus.
Traditional costing is an outdated costing system in many companies because those
manufacturing companies now use machines and computers for much of their
production.
Computers and machines make the system outdated because it often uses direct labor
hours to calculate cost. Cost is not appropriately assigned because direct labor hours is
not the best cost driver to use.
Traditional costing negates other cost drivers that may contribute to the cost of an
item.
Another disadvantage of solely using the traditional costing system is that it can lead
to bad management decisions because it excludes certain nonmanufacturing costs.
So if Xu Ji encountered by the former traditional costing system it will conduct innacuracy of
product costs because accounting was predominantly driven by external financing report
purposes. Because of this innacuracy of product cost, Xu Ji’s ability to compete in pricing
with its competitor to facing Chinas free market competition was become lower.
As we can see in picture, the direct labour cost instead of being charged directly to products,
was allocated first to production departments then to finished products. ABC costing is
needed to fix this problem so that the direct labour cost can be charged directly to product
cost.